Canadian Solar U.A.E. OIL AND SOLAR - A PHANTOM RELATIONSHIP WITH REAL CONSEQUENCES
Given that oil and solar energy compete in different energy sectors, for the most part, simple logic dictates that price changes in one should not really affect the other.
According to Bloomberg, solar doesn’t compete with oil as a source of electricity except on small islands and in some crude exporting countries. Oil generates less than 1 percent of the U.S. electricity power supply and 5 percent globally. And yet changes in the oil price have had a long-standing impact on the attractiveness of solar energy to investors.
Nevertheless, it would seem the correlation between oil and solar is little more than a psychological link in many investors minds. According to a report in The New York Times’ green blog analysts believe this phenomenon is “…a sign of oversimplification by investors, who lump renewables together and expect them to rise as old energy, or fossil fuels, decline. “
“It’s a guttural connection people make, based more on feeling than on facts,” said Ron Pernick, a researcher quoted in the report. Nevertheless, when the price of oil goes up, solar stocks almost always rise along with it, and vice versa. The effects of the oil price on solar are real.
“Nitin Kumar, a well-respected analyst in the solar space published a research note in October that studied the link between the crude oil price and solar for the first time. The bottom line is that we are starting to see solar stock trading up and down with the whole energy sector,” as Dr. Shawn Qu, CEO and founder of Canadian Solar, wrote in his LinkedIn blog.
“I have been in the solar industry for my entire 18-year career and I take it as compliment to all solar industry participants that solar has achieved such a prominent position. If the crude oil price can directly influence solar product demand, the day must come when we see solar energy production affect the demand for oil and gas.”
However, for the moment, it is clear that changes in the crude oil price affecting people’s investment in solar energy is driven more by emotional considerations than supply and demand in the oil energy market directly impacting demand for solar. The numbers reveal just how small the intersection of oil and solar in the electricity market actually is.
In the US, 39% of electricity is coal generated (still surprisingly high), 27% gas, 19% nuclear, 7% hydro, 6% renewables and only 1% oil.
After the Fukushima Nuclear double-meltdown accident in Japan, 27.6% of electricity generation is now from coal, 42.5% from LNG, 8.6% from hydro, 6.4 from renewables, while 8.3% is from oil.
In the European Union (EU 27), it’s 28% coal, 16% gas, 2% oil, 27% nuclear, 12% hydro, 7% wind and the remaining 8% from solar and other forms of energy.
While in China, 74% comes from coal, 2% from gas, less than 3% from wind and a mere 0.16% from solar. The remaining power is provided by hydro, nuclear and others.
“It would appear that, by and large, we don’t really burn that much oil for electricity, and the cost of electricity is more related to coal and gas than oil,” said Dr. Qu. “Meanwhile, a significant portion of solar products goes to the distributed power generation market and serves retail customers. The retail electricity price, which has seen a rising trend in recent years, is mainly affected by transmission and other fixed costs rather the input fuel,” he said.
Nevertheless, over the long term, the writing is on the wall. Cost of production of solar energy will continue to fall, while efficiencies will rise. And it is safe to assume that the reverse is true of oil and all other fossil fuels. The implications are clear for energy investors who take a big-picture view that spans decades rather than months or years.
And what could be better proof of this than the fact that the world’s largest crude oil producer, Saudi ARAMCO has chosen Canadian Solar to partner in developing the largest ground-mounted PV system in Saudi Arabia.
Riyadh, Saudi Arabia
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CANADIAN SOLAR ADDS POWER TO GATORADE
A leading energy drink’s thirst to do the right thing to the environment and its customers led to the installation of a 1.7 MW PV system at it’s bottling and packaging facility in Tolleson, Arizona.
“Gatorade understands the positive impact clean energy can bring to the bottom line as well as to the community around them,” commented Curt Hilliker, VP of the Commercial Division at Sun Valley Solar Solutions, which designed and implemented the solution.
More than 5,600 Canadian Solar PV panels now adorn the roof of the 900,000 square foot distribution center, which can generate more than three million kilowatt hours annually. That’s enough electricity to power approximately 200 average Arizona homes for an entire year, or over 10 percent of the electricity used by the entire Tolleson facility annually. And that translates into electricity cost savings for PepsiCo, which is Gatorade's parent company.
The solar thermal system uses a variety of technologies, including flat panels and solar beams, to pre-heat ingredient water for hot-fill products, such as Gatorade, which is heated and pasteurized before bottling. The Gatorade facility, the largest of nine plants making the drink in the US, can now use renewable solar energy to pump out 59 million cases of the sports drink a year, according to the company.
“Solar generated electricity is used for everything,” said Tom Schaefer, Director of Engineering for PepsiCo Resource Conservation. “The warehouse, the plant – anything that uses electricity. We’re directly offsetting what we normally would have bought from the electrical grid,” he said. The importance of this and other solar projects is highlighted on page 43 of PepsiCo's Sustainability Report.
More than this, the installation has important implications for solar energy in the region as a whole. The fact that such a well-known brand has taken solar on board will be noticed by other companies. “Gatorade’s leadership plays an important role in driving the acceptance of commercial-scale solar energy, and we’re tremendously excited to partner with them on such an important initiative,” said Sun Valley Solutions’ Hilliker.
PepsiCo is developing sustainable energy and water programs at a variety of its other manufacturing sites too, including an experiment to take its Casa Grande Frito-Lay snack-chip facility nearly entirely off the public electric, natural-gas and water systems. The company also installed a large solar system at a Fullerton, California, facility last month.
"Ultimately, it's a commitment to the future," said Rich Schutzenhofer, vice president for engineering technology and sustainability for PepsiCo in Chicago.
While Arizona is known for its blue skies and sunshine, PepsiCo is also implementing solar solutions in less sunny climes. The United Kingdom’s Copella plant in Boxford is proving that solar energy generation is possible, even in less than optimal conditions. It recently installed solar rooftop panels that produce 150 kilowatts of electricity, becoming the first PepsiCo facility in the United Kingdom to generate on-site renewable electricity.
“This project has generated enough electricity in its first week to run an average U.K. home for a whole year,” said Dave Clark, sustainability manager, PepsiCo United Kingdom. The solar panel project at Boxford is the first of many projects that PepsiCo UK is using to continually increase the percentage of energy coming from renewable sources and help reach its goal of becoming fossil fuel-free by 2023.